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November 08, 2017 01:00 AM

VEM eyes Mexico mold making factory

Steve Toloken
Assistant Managing Editor
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    Caroline Seidel
    Marc Weinmann from VEM Manufacturing at Fakuma.

    Mold maker VEM Tooling Ltd. is in the midst of a significant expansion fueled in part by manufacturers looking to source closer to their home markets, and its plans could include a factory in Mexico by 2020.

    The company first has some more immediate priorities, like a $1.5 million investment in a new Bulgaria plant to open next year, and similarly sized investments at existing factories in Thailand and India.

    But it said that once it completes those, it will turn attention to Mexico, as it sees companies in North America wanting their manufacturing supply chains closer to home.

    VEM, which is German-owned, has grown from startup in Hong Kong in 1998 to $15 million in sales now, mostly with a focus on Asian manufacturing.

    It built its first mold making plant, in Shenzhen, China, in 2003, followed by production in Thailand in 2008 and a factory in India that opened last year.

    VEM President Marc Weinmann said his company is now very interested in investing in Mexico, but admitted to uncertainty from tensions within the North American Free Trade Agreement countries, with the Trump administration calling for big changes to the trade pact.

    "I need to see what happens," he said. "I personally think NAFTA is a very good thing for the Americans. I think it's a very good thing for everybody."

    A Mexican plant would probably be about the same size as the Bulgarian investment, which is a $1.5 million investment in a joint venture with German injection molder Mecalit GmbH Kunststoffverarbeitung, he said.

    He's watching politics closely to see how a Mexican investment proceeds.

    "If Trump is going to be reelected, I will probably put Mexico on the back burner," he said. "If we have someone who is a little more realistic, then yes."

    In an interview in VEM's booth at the Fakuma trade fair in Friedrichshafen, Germany, in mid-October, he said the company needs to first complete the ongoing investments in Eastern Europe and Asia to avoid taking on too much.

    "I have Thailand growing, I have Bulgaria starting out," he said. "I cannot stretch myself too far."

    "This is why I put [Mexico] to 2020, by then we know what's going to happen," he said.

    But Wienmann expects business ties between the three NAFTA countries will return to a more normal, pre-2016 state: "Once that goes back to normal, I think the U.S. and Mexico complement each other very well."

    Similar to VEM's Mexico plans, Weinmann said the Bulgarian investment is driven by European customers who want to buy molds closer to home.

    "I do have a lot of European customers who 10 years ago were very excited to go to China or to Asia, who now tell me 'Ah, we'd rather be in Eastern Europe, or stay in Europe,'" he said.

    There's also a shift away from China as a source of lower-cost molds, although China remains VEM's largest facility, he said.

    "I can still see China costs going up for the next few years, and India is a growth story itself," he said, noting demand from car makers like VW that want to localize production in India for cars made for the local market.

    "We're going to grow no matter but it will happen in the near future that we will move some work from China to Bulgaria and to India, for our very cost sensitive customers," Weinmann said.

    VEM also plans to open a new facility in Thailand next year, where it does both mold making and injection molding in a facility in Rayong, Thailand, that it opened in 2010, Weinmann said.

    The new Rayong plant, which is also about a $1.5 million investment, will have a clean room for medical molding. Weinmann said VEM is seeing more demand from local Thai customers, in contrast to its operations in China, which are almost entirely export-oriented.

    The Shenzhen plant, with about 200 employees, is VEM's largest. It remains competitive but needs to automate and upgrade to handle China's rising costs, Weinmann said.

    The Shenzhen operation will lead companywide automation planning.

    "We will be automating China first and then what we learn from China we pass on to the other factories," he said.

    China will become a more technology-driven operation.

    "We see shifts going away from China and if you want to stay in China you have to specialize," he said. "So, we will specialize in China in smaller, high-precision molds. We have to go with the flow and the flow is away from China to Europe and India."

    Weinmann said changes in the industry are driving both consolidation and higher technology.

    "We have to get bigger, there's no other choice but to get bigger," he said.

    The company has about $15 million in annual sales now, with global production of about 500 molds, but is targeting $25 million in annual sales in five years, Weinmann said.

    Weinmann also believes that technology, like 3D printing of steel molds and more general automation, could dramatically change the mold making industry in the next five years, making labor somewhat less important and elevating capital and technology.

    "Disruptive technologies are coming everywhere," he said. "It's a little like the self-driving cars, there's going to be a major change."

    "Or the electric cars, to go from combustion engines to electric engines, we're going to see similar disruptions in tool making," he said.

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